Five Things You Need to Know to Start Your Day
The Federal Reserve leaves rates unchanged, oil enters a bear market, and more on the tangled relationship between 1MDB and Goldman Sachs. Here are some of the things people in markets are talking about.
The Fed Holds
The Federal Reserve left interest rates unchanged and stayed on course to hike in December as strong economic growth, higher tariffs and rising wages look set to spur inflation. The central bank said “economic activity has been rising at a strong rate” and job gains “have been strong,” acknowledging a drop in the unemployment rate, while repeating its outlook for “further gradual” rate increases in its statement Thursday. In one of the only tweaks to the statement, the FOMC said growth in business fixed investment has “moderated from its rapid pace earlier in the year,” compared with the previous “grown strongly.” Third-quarter data showed non-residential investment increased at the slowest pace in almost two years. This was the last meeting with no news conference afterward, which actually might not change a whole lot. Meanwhile, fixed-income traders think the Fed may be making a big mistake.
Blankfein and 1MDB
Years before Goldman Sachs arranged bond deals now at the heart of globe-spanning corruption probes, the firm’s then-CEO Lloyd Blankfein personally helped forge ties with Malaysia and its new sovereign wealth fund, according to people with knowledge of the matter. Blankfein was the unidentified high-ranking Goldman Sachs executive referenced in U.S. court documents who attended a 2009 meeting with the former Malaysian prime minister, the people said. The meeting was arranged with the help of men who are now tied to the subsequent plundering of the 1MDB fund, according to U.S. court documents unsealed last week. Also, ex-Goldman banker Roger Ng is fighting extradition to the U.S., where he would face charges of money laundering and bribery related to scandal-plagued Malaysian state investment company 1MDB, according to people with knowledge of the matter.
Crude Enters a Bear Market
Oil in New York fell into a bear market, adding pressure on OPEC and its allies to cut production just months after adding barrels. Futures tumbled 1.6 percent Thursday, extending a decline from the October high to more than 20 percent, meeting the common definition of a bear market. A faster-than-expected inventory buildup dashed speculators’ hopes that prices could reach $100, while U.S. crude production has accelerated to new records, OPEC output is at the highest in years and waivers will allow some Iranian crude to flow to the market despite U.S. sanctions.
Google in China
Here's a Bloomberg Businessweek story about Google’s China plans that's worth a read. The company, which is also under fire for its handling of sexual harassment complaints, has yet to explain how search in China would square with its long-standing pledge to protect the privacy of its users. Privately, executives have argued that if Google wants to continue growing globally, it will have to work with governments that don’t share its values. Interviews with more than 18 current and former employees suggest the company’s predicament resulted in part from failing to learn from mistakes that played out a decade earlier, when it first confronted the realities of China’s economic and political might. Google declined to make Brin, Pichai, or any other executive available for an interview.
As the week winds to a close, Friday will feature the RBA's final statement on monetary policy for the year. Australia also gets info on home lending. China releases inflation figures, while Malaysia announces industrial output and Indonesia is expected to report its current-account deficit widened even further in the third quarter. Stocks in Asia looked set to decline for the first time in four days, tracking a drop in their U.S. counterparts.
What we’ve been reading
This is what caught our eye over the last 24 hours.
- What's next for Asian stocks.
- Taiwan commissions warships amid China threat warnings.
- The best U.S. business school isn’t Harvard, Bloomberg Businessweek's rankings find.
- U.S. crop giants are doing more Brazil deals thanks to the trade war.
- Women in Japan are tiring of pastel pink and rhinestones.
- Who is Tesla’s new chair?
- The age of the crummy airport hotel is over.
©2018 Bloomberg L.P.